Kenya’s foreign exchange reserves continued to decline considerably in the week as the central bank intervened to reduce the slide of the currency.
The forex reserves fell from Ksh 888 billion shillings ( 8.22 billion U.S. dollars) to 8.12 billion dollars, the Central Bank of Kenya said in its weekly bulletin published Saturday.
The dollar reserves have been on a decline in the past weeks as the shilling faces pressure from international currencies.
The previous week, the forex reserves declined by 143 million dollars as the shilling depreciated.
During the week, the shilling exchanged at KSh 108.83 per US dollar on October 29, compared to KSh 108.75 per US dollar on October 22.
On the other hand, the regulator said its current account deficit narrowed to 5 percent of the gross domestic product (GDP) in the 12 months to September compared to 5.4 percent of GDP during a similar period in 2019.
“This reflected lower oil imports and strong performance of exports, particularly tea, as well as resilient remittances,” said the CBK.
According to Genghis Capital, the narrowing of the current account deficit reflects the dampened effect of the international trade that weighed negatively on imports.
“We view these low levels of current account deficit as transitory and is expected to widen gradually as the global market recovers and dissipation of international trade risks. This implies that at some point in 1H21, the external funding pressure will kick-in and this will be plugged by the World Bank Development Policy Operation (DPO) III; expected to the tune of Ksh 150 billion in the current fiscal year,” Genghis Capital said in its weekly investor note.
The Central banks’ Monetary Policy Committee meets on November 26.